GlaxoSmithKline supplies an estimated seven per cent of the world's pharmaceutical market and has six major disease areas – asthma, virus control, infections, mental health, diabetes and digestive conditions.
GlaxoSmithKline: Will realism prevail as drugs giant goes hostile with US$6.2bn HGS bid?
Shares in GlaxoSmithKline (LON:GSK) fell in morning trade in London after it went hostile with its bid to acquire the American biotech Human Genome Sciences (NASDAQ:HGS).
Europe’s largest drugs firm has lodged a US$13 a share, or US$6.2 billion, cash offer and said it won’t budge on the deal now on the table. It also said it won’t participate in HGS’ “strategic alternatives” review process.
The current HGS share price of US$14.62 suggests American investors were expecting a higher offer.
In London, the mood was a little more realistic.
“We noted last month that we believed some sort of deal was likely and, in light of the broader challenges across the industry, we continue to believe it will be difficult for shareholders to ignore the certainty of a cash offer,” said Dr Mike Mitchell, analyst at broker Seymour Pierce.
At 11.10am in London, GSK shares were down 21 pence at 1,403 pence.
Going hostile with a bid runs slightly against the grain for a big pharma company such as Glaxo.
The titans of the drugs world tend to favour collaborative, joint-venture style deals or agreed mega-mergers where cost savings are the rationale behind the transaction.
So to see boss Andrew Witty taking a more combative stance has raised a few eyebrows in the City.
The company said this morning: “GSK continues to believe it has made a full and fair offer which is in the interest of shareholders of both companies.
“The transaction is well aligned to GSK's long-term strategy of delivering sustainable growth, simplifying GSK's business model, enhancing R&D returns and deploying capital with discipline.
“For HGS shareholders, it provides immediate liquidity at a substantial premium while eliminating further exposure to the significant execution risk inherent in HGS achieving its future growth objectives.”
If it is successful, GSK will take full ownership of Benlysta, a breakthrough drug for the auto-immune disease Lupus. HGS discovered the drug, but it is sold by GSK.
Followers of ImmuPharma (LON:IMM) will be closely monitoring events as the UK-listed drug firm is developing Lupuzor, a competitor to Benlysta, which is ready to enter the final stages of clinical trials.
It is currently holding a beauty parade to find a strategic partner which would fund these studies.